Wednesday, July 28, 2010

Perspectives From Jack Schultz

Manufacturing Rebounding - Jobs Back to USA
Largely unnoticed by the national media is the dramatic rebound taking place in the manufacturing sector, a favorite of Agracel. We've liked it since starting the company because of the way that gains in productivity get translated into higher wages that result in improving economic results for the Agurbs.
In the last six months we've detected a trend in manufacturers moving production back from overseas plants. While the move back is as yet just a trickle, we expect it to pick up in intensity over the next several years.
Since January, manufacturing jobs have represented 126,000 of the 982,000 (with 411,000 of those being temporary Census workers) total jobs added in the economy. While this rebound is still small in comparison to the 2.2 million jobs lost in the manufacturing sector since the recession started in 2008, again, it is a trend that is only beginning and will hopefully continue to pick up momentum.
And, those gains in productivity? For the first quarter of 2010, non-farm productivity increased at a 2.8% annual rate, up 6.1% versus a year ago. This year-to-year increase represents the fastest increase in almost 50 years.
Another reason we focus on manufacturing is due to the number of secondary jobs it supports, or the employment multiplier effect. Employment multipliers measure how job creation or destruction in a particular industry translates into wider employment changes throughout the economy. The employment multiplier in the manufacturing industry is much higher than in the rest of the economy. According to one study from the Economic Policy Institute, each 100 jobs in manufacturing supports 291 jobs elsewhere in the economy. In the business services sector, that multiplier is 100 to 154, and in retail trade, it is 100 to 88.
We will continue to center our efforts on the manufacturing arena. All indications are that it is on an upward trend. Stay tuned!
Sources: bls.gov, Economic Policy Institute, First Trust Advisors L.P.